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Tech Stocks Slump As Market Digests Trade News

Stocks closed lower yesterday, with tech leading the way, as the market digests ongoing trade developments.

On the one hand, traders are cheering reports the administration will remove steel and aluminum tariffs on Canada and Mexico. Same for the administration's delay on imposing auto tariffs for 6 months, as a concession to the EU and Japan while trade talks with those countries continue.

But reports that U.S.-China trade talks have stalled, and are getting more contentious, is unnerving traders. Add in the U.S. ban on China's Huawei Technologies, and some worry that a U.S.-China trade deal is suddenly a much longer way off.

Although, a degree of relief should be felt once we hear that President Trump will meet with President Xi after the G20 summit in Japan next month. But as of yet, we have not heard of any plans from either country to do so. (But it is still early.)

Most people believe that both countries still want a deal. Especially China, since the tariffs are expected to only shave up to a half percentage point off of the U.S. GDP, but upwards of one full percentage point off of China's.

But the deal has to be right economically and politically for both countries.

So I expect to see a bit more posturing. But ultimately, I expect them to eventually come together for a mutually agreeable deal that they can both tout as a success.

In the meantime, our economy looks great.

And that means I'm expecting more gains to come from this record bull market.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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